Pension schemes will need to factor in “longevity risks” with life expectancy becoming increasingly difficult to predict, says Broadstone, as the latest data reveals a rise in mortality rates over the past few years.
According to figures from the Office for National Statistics, there were 581, 363 deaths registered in England and Wales in 2023, up 0.7% on 2022 figures.
There were 4.7% or 27,528 more deaths than the five year average (2017 to 2022 excluding 2020). Deaths were above the five-year average in every English region last year, with South West England recording the biggest jump and London the lowest.
The ONS said there were more male deaths than female deaths in 2023, continuing the trend seen in 2021 and 2022.
While the data points to the pandemic as the main driver behind the uptick in mortality rates, Broadstone said this “potentially glosses over some more fundamental long-term problems and systemic issues” that could impact the population for decades to come.
David Hamilton, chief actuary at Broadstone, said: “Understanding and allowing for these longevity risks will likely become an increasingly important consideration for insurers and those running and supporting pension schemes, as pressures on the NHS continue to swell and accessibility to effective healthcare declines.
“For DB pension schemes, a longer-term view is crucial. Having taken huge steps to reduce interest rate and inflationary risks over recent years, shifting longevity is increasingly becoming one of their biggest areas of risk.”
Hamilton added: “With life expectancy becoming increasingly difficult to project, trustees, sponsors and insurers alike should make sure they are considering this key area of uncertainty to better understand the financial implications of alternative scenarios.”
